Trauma Associates of North Broward, Inc

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IN THE MATTER OF TRAUMA ASSOCIATES OF NORTH BROW ARD, INC. , ET AL. CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEe. 5 OF THE FEDERAL TRADE COMMISSION ACT Nov. , 1994 Docket C3541. Complaint, Nov. 1994--Decision, This consent order requires, among other things, Dr. Johnson, the president of a Florida corporation, to dissolve Trauma Associates within 180 days. Prior to its dissolution, Trauma Associates is required to give copies of the settlement to any entity with whom it has entered into contract negotiations for trauma surgical services since its inception. In addition, the order prohibits the ten surgeons from entering into, organizing, or implementing any agreement to: refuse to provide surgical services in connection with any effort to fix the prices for such services; prevent the offering or delivery of surgical services; deal on collectively determined terms with any provider of health care services; or encourage anyone to engage in an activity prohibited by the settlement. Appearances For the Commission: Mark J. Horoschak, Markus H. Meier and Mary Lou Steptoe.

For the respondents: Pro se and Donald Korman, Korman Schorr Wagenheim Fort Lauderdale, FL., for respondent Santiago Triana, M.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act c. 41 et seq. and by virtue of the authority as amended, Title IS , U. vested in it by said Act, the Federal Trade Commission, having reason to believe that the respondents named in the caption hereof have violated and are violating the provisions of Section 5 of the Federal Trade Commission Act, IS U. c. 45 , and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues iis complaint, stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Trauma Associates of North ) is a corporation Broward, Inc. (hereinafter "Trauma Associates organized, existing, and doing business under and by virtue of the TRAUMA ASSOCIATES OF NORTH BROW ARD , INC. , ET AL. 1131 1130 Complainl laws of the State of Florida, with its office and principal place of business located at 2170 Southeast 17th Street, Suite 305, Fort Lauderdale, Florida.

The individual respondents named in the caption above (herein­ after "surgeon respondents ) are general surgeons, licensed to practice medicine in the State of Florida, and are engaged in the business of providing surgical services to patients for a fee Broward County, Florida. Their respective business addresses are: Carl Amko, M. , 412 Southeast 17th SIreet, Fort Lauderdale, Florida;

Lucien Armand, M, , 4330 West Broward Boulevard, Suite 308 Plantation, Florida;

Frantz Chery, M.D., 4101 Northwest 4Ih Street, Suite 302, Plantation Florida;

Wiliam Cohen, M. D., 8251 West Broward Boulevard, Suite H Plantation, Florida;

Sergio Gallenero, M.D. , 9750 Northwest 33rd Street, Coral Springs, Florida;

Kwang-Jae Joh, M. , One West Sample Road, Suite 207, Pompano Beach, Florida;

Richard A. Johnson, M. , 1625 Southeast 3rd Avenue, Suite 721 Fort Lauderdale, Florida;

R. Nabut, M. , 1500 Hillsboro Boulevard, Suite 207 , Deerfield Beach, Florida;

Aiden O' Rourke, M, , 315 Southeast 13th Street, Fort Lauderdale Florida;

Santiago Triana, M. , Medical Building, 150 Northwest 70th A venue, Suite 7 , Plantation, Florida.

PAR, 2. The acts and practices of Trauma Associates and the surgeon respondents, including those herein alleged, are in or affect commerce within the meaning of Section 5 of the Federal Trade Commission Act, as amended, 15 U. c. 45. PAR. 3. Except to the extent that competition has been restrained as alleged herein, the surgeon respondents have been, and are now in competition among themselves and with other providers of general surgical services in Broward County, Florida. PAR. 4. The North Broward Hospital District (hereinafter "the District ) is a tax-supported hospital authority, with its principal Complaint 118 FTC. offices located at 1625 Southeast Third A venue, Fort Lauderdale Florida. Broward General Medical Center (hereinafter "Broward General") and North Broward Medical Center (hereinafter "North Broward") are District hospitals located at 1 600 South Andrews Avenue, Fort Lauderdale, Florida, and 201 Sample Road, Pompano Beach, Florida, respectively.

PAR, 5. On or about March 25, 1992 , the District' s Board of Commissioners offcially resolved to seek a license from the State of Florida to operate state-approved trauma centers at Broward General and North Broward. State regulations governing trauma centers include the requirement that a hospital have a minimum of five general surgeons committed to covering the trauma center on a round-the-clock or short-notice basis, PAR. 6. Each respondent surgeon signed, on an individual basis the District s applications to operate state-approved trauma centers thereby committing himself to participate in the District s trauma program, PAR. 7. During April, 1992, Dr. Richard A. Johnson, the surgeon respondents, leader, entered into contract negotiations with District officials, on behalf of the surgeon respondents. The purpose of these negotiations was to secure a single contract for the surgeon respondents to staff the Broward General and North Broward trauma centers. District offcials wished to enter individual contracts with each of the surgeon respondents, but the surgeon respondents said that they would only agree to work aI the trauma centers under a single contract that included all of the surgeon respondents. PAR. 8. During contract negotiations, Dr. Johnson made a number of proposals to the District calling for the payment of various sums of money necessary to cover the costs of the surgeon respondents ' services and expenses. The surgeon respondents agreed 10 these price proposals prior to their submission to the District. PAR. 9. On May 1992, the surgeon respondents began providing trauma services to the District. On May 5th the District and Dr. Johnson signed a letter of intent ("LOI") outlining the terms under which the surgeon respondents would work, until a more formal contract could be agreed upon. Dr. Johnson signed the LOI on behalf of the surgeon respondents.

PAR. 10. The LOI explicitly omitted any financial terms, as these were still being negotiated. Despite this fact, Dr. Johnson reached an understanding with the District that the District would pay TRAUMA ASSOCIATES OF NORTH BROWARD, INC., ET AL. 1133 1130 Complaint each surgeon respondent $100 per hour for in-house service (where the surgeon is present in the trauma center) and $50 per hour for on­ eall coverage (where the surgeon is available to respond to a "trauma alert" within twenty minutes). The District also agreed to pay most of the surgeon respondents, and Trauma Associates, costs, which included malpractice liability insurance, offce rent, staff, telephones and other such items.

PAR. 11. Dr. Johnson incorporated Trauma Associates as a forprofit Florida corporation on or about May 7 1992. Dr. Johnson is Trauma Associates' only director, officer and owner. None of the other surgeon respondents have any ownership interest in, or any other legal relationship with, Trauma Associates. Trauma Associates was intended to function as the "administrative arm" of the surgeon respondents, and it has served as a vehicle for Dr. Johnson and the other surgeon respondents to engage in collective negotiations on fees and other contract terms to be sought from the District and others.

PAR. 12. The surgeon respondents did not integrate their surgical practices in any legally significant way, nor did they create any effciencies that justify their agreement to act collectively vis-a-vis the District. The surgeon respondents provided the District with little more than a fixed price for their individual services. PAR. 13. The District made lump-sum payments, totaling around $600 000, 10 the surgeon respondents, through Dr. Johnson and Trauma Associates, in May and June, 1992. PAR. 14. In July, 1992, the District decided not to enter a contract with the surgeon respondents as a group. Instead, the District announced its intention to contract with the surgeon respondents individually. In response, the surgeon respondents refused to deal with the District individually. Additionally, the surgeon respondents sent the District a letter with a list of demands, including price and price-related terms, that had to be included in any final contract, and they threatened to cease providing trauma services at the Broward General and North Broward trauma centers unless all of their demands were met. Respondent Drs. Amko, Armand, Chery, Cohen Gal1enero, Joh, Johnson, O' Rourke, and Triana signed This letter. PAR. 15. One week after the surgeon respondents threatened to cease providing trauma services, respondent Drs. Amko, Armand Chery, Cohen, Gallenero, Joh, Johnson, Nabut, O' Rourke, and Triana walked out of the District s trauma centers. As a result of the Complaint 118 FTC walkout, the District was forced to shut down the North Broward trauma center.

PAR. 16, By engaging in the acts or practices herein alleged, the surgeon respondents have acted as a combination or conspiracy to fix or increase the fees received from the District for the provision of trauma surgical services, and to otherwise restrain competition among general surgeons in Broward County, Florida. PAR. 17. Trauma Associates has conspired with the surgeon respondents, and has acted to implement an agreement among the surgeon respondents to restrain competition among general surgeons by, among other things, facilitating, entering into, and implementing an agreement, express or implied, that respondent Trauma Associates would negotiate the terms and conditions of agreements between surgeon respondents and the District and others, including the prices to be paid for the surgeon respondents ' services. PAR. 18. The acts and practices of Trauma Associates and the surgeon respondents, as herein alleged, have had the purpose or ef­ fect, or the tendency and capacity, to restrain competition unreasona­ bly and to injure consumers in the following ways, among others: A. By restraining competition among general surgeons in Broward County, Florida;

B. By fixing or increasing the prices that are paid to general surgeons who provide trauma surgical services in Broward County, Florida;

C. By raising the cost, lowering the quality, and reducing access to and the quality-adjusted output of the District s trauma services; and D. By depriving the District and its patients of the benefits of competition among general surgeons in Broward County, Florida. PAR, 19. The combination or conspiracy and the acts and prac­ tices of Trauma Associates and the surgeon respondents, as herein alleged, constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act, 15 U. c. 45. The violation or Ihe effects thereof, as herein alleged, are continuing and wil continue or recur in the absence of the relief herein requested. TRAUMA ASSOCIATES OF NORTH BROW ARD, INC. , ET AL. 1135 1130 Decision and Order DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondents with violation of the Federal Trade Commission Act; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined Ihat it had reason to believe that the respondents have violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2. 34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order.

1. Respondent Trauma Associates of North Broward, Inc. , is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Florida, with its offce and principal place of business located at 2170 Southeast 17th Street, Suite 305 Fort Lauderdale, Florida.

Respondent surgeons are Carl Amko, M. , Lucien Affand D., Frantz Chery, M. , William Cohen, M. , Sergio Gallenero , Kwang-Jae Joh, M, , Richard A. Johnson, M. , J. R. Nabut , Aiden O' Rourke, M. , and Santiago Triana, M. , each of whom is a general surgeon Ecensed to practice medicine in the State of Florida, and is engaged in Ihe business of providing surgical services to patients for a fee in Broward County, Florida. Decision and Order 118 FTC 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is ordered, That for purposes of this order, the following definitions shall apply:

A. Trauma Associates means Trauma Associates of North Broward, Inc" a corporation organized, existing, and doing business under and by virtue of the laws of the State of Florida, with its office and principal place of business located at 2170 Southeast 17th Street Suite 305, Fort Lauderdale, Florida, its Board of Directors, committees, officers, members, representatives, agents, employees successors, and assigns.

B. Surgeon respondents means Carl Amko, M,D" Lucien Armand, M. , Frantz Chery, M. , William Cohen, M. D., Sergio Gallenero, M, , Kwang-Jae Joh, M. , Richard A, Johnson, M. J, R. Nabut, M. , Aiden O' Rourke, M. D., and Santiago Triana , each of whom is a general surgeon licensed to practice medi­ cine in the State of Florida, and is engaged in the business of provid­ ing surgical services to patients for a fee in Broward County, Florida. C. The District means the North Broward Hospital District, a tax-supported hospital authority, with its principal offices located at 1625 Southeast Third A venue, Fort Lauderdale, Florida, its subsidiar­ ies, affiliates, commissioners, offcers, administrators, directors, com­ mittees, agents, employees, representatives, successors, and assigns. D. Broward General" means the Broward General Medical Center, one of the hospitals of the North Broward Hospital District located at 1600 South Andrews A venue, Fort Lauderdale, Florida, its subsidiaries, affliates, offcers, administrators, directors, committees agents, employees, representatives, successors, and assigns. E. North Broward' means the North Broward Medical Center one of the hospitals of the North Broward Hospital District, located at 201 Sample Road, Pompano Beach, Florida, its subsidiaries, affiliates, officers, administrators, directors, committees, agents employees, representatives, successors, and assigns. TRAUMA ASSOCIATES OFNORTHBROWARD, INC., ET AL. 1137 1130 Decision and Order F. Integrated joint venture means a joint arrangement to provide health-care services in which physicians who would otherwise be competitors pool their capital to finance the venture, by themselves or together with others, and share a substantial risk of loss from their participation in the venture, II.

It is further ordered That each surgeon respondent directly or indirectly, or through any corporate or other device, in connection with the provision of health-care services in or affecting commerce as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U. c. 44, forthwith cease and desist from entering into, attempting to enter into, organizing or attempting to organize, implementing or attempting to implement, or continuing or attempting to continue any combination, agreement, or understand­ ing, express or implied, for the purpose or with the effect of: A. Preventing the offering or delivery of surgical services by the District, Broward General, North Broward, or any other provider of health-care services, including, but not limited to, any agreement to refuse to deal or threaten to refuse to deal with the District, Broward General, North Broward, or any other provider of health-care services;

B, Dealing with the District, Broward General, North Broward or any other provider of health-care services on collectively determined terms; or C. Encouraging, advising, pressuring, inducing, or attempting to induce any person to engage in any action prohibited by this order. Provided that nothing in this order shall be construed to prohibit any individual surgeon respondent from:

J. Entering into an agreement or combination with any other physician with whom Ihe surgeon respondent practices in partnership or in a professional corporation, or who is employed by the same person as Ihe surgeon respondent, to deal with any third party on collectively determined terms; or 2. Forming, facilitating the formation of, or participating in an integra led joint venture and dealing with any third party on Decision and Order J 18 F. collectively detennined tenns through the joint venture, as long as the surgeons participating in the joint venture remain free to deal individually with third parties.

It is further ordered That respondent Richard A. Johnson, M. shall:

A. Dissolve Trauma Associates within one hundred and eighty (180) days after the date on which This order becomes final; and B. File a verified written report demonstrating how he has complied with Section IILA. above, within two hundred and ten (210) days after the date on which this order becomes final. IV.

It isfurther ordered That respondent Trauma Associates shall: A. Within thirty (30) days after the date on which this order becomes final, and prior to the dissolution provided for in Section IILA. above, distribute by first-class mail a copy of this order and the accompanying complaint to each party with whom Trauma Associates has entered into contract negotiations or finalized a contract concerning the provision of trauma surgical services; and B. Within sixty (60) days after the date on which this order becomes final, and prior to the dissolution provided for in Section lila. above, file a verified written report demonstrating how it has complied with Section IV. A. above.

It is further ordered, That each surgeon respondent shall: A. File a written report with the Commission within ninety (90) days after the date the order becomes final. and annually thereafter for three (3) years on Ihe anniversary of the date the order became final, and at such other times as the Commission may by written notice require, setting forth in detail the manner and form in which TRAUMA ASSOCIATES OF NORTH BROW ARD, INC., ET AL. 1139 1130 Decision and Order the surgeon respondent has complied and is complying with the order;

B. For a period of five (5) years after the date on which this order becomes final, notify the Commission in writing within thirty (30) days after the surgeon respondent forms or participates in the formation of, or joins or participates in, any integrated joint venture; and C. For a period of five (5) years after the date on which this order becomes final, maintain and make available to Commission staff, for inspection and copying upon reasonable notice, records sufficient to describe in detail any action taken in connection with the activities covered by this order.

Commissioner Varney not participating.

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Complaint 118 F.